On March 30, less than 6 months since the shutdown of India’s largest bitcoin exchange Zebpay, one of the last remaining cryptocurrency exchanges in India, Coindelta, closed down its services.
In an official statement, Shubham Yadav, the founder of Coindelta, wrote that there has not been enough progress in the process of overturning the decision of the Reserve Bank of India to prohibit local banks from dealing with bitcoin and crypto-related businesses.
It’s Already Too Late For the Bitcoin Industry of India
The Supreme Court of India has held hearings throughout the past 12 months to engage with industry executives and companies to potentially overturn the decision of the RBI and legalize cryptocurrency trading in the country.
The optimism towards the efforts of some government officials and the cryptocurrency task force established by the government initially led both investors and startups in the local market to be positive about the future of India’s cryptocurrency sector.
In December 2018, according to a report released by the New Indian Express, an official at the cryptocurrency committee composed of RBI, SEB, and Ministry of Electronics and Information officials, said that there is a consensus among officials to not dismiss crypto assets as illegal payment methods.
An official at the committee who asked for anonymity due to the sensitivity of the topic said:
We have already had two meetings. There is a general consensus that cryptocurrency cannot be dismissed as completely illegal. It needs to be legalized with strong riders. Deliberations are on. We will have more clarity soon.
But, it seems as if it is already too late to take action. Since the statement of the official was made five months ago, the cryptocurrency sector of India is no closer to seeing progress in legalization and government recognition.
India’s crypto industry witnessed robust gains over the years but has largely been nullified following the central bank’s banking ban. | Source: Shutterstock
More importantly, exchanges, which rely on transactions and local users to remain solvent and maintain a stable revenue source, have shut down.
The closure of exchanges despite the resources, capital, and manpower put into establishing a sophisticated infrastructure to process cryptocurrency trades suggest that exchanges do not see a future wherein practical regulatory frameworks are created.
Coindelta founder Shubham Yadav said:
It has been really difficult for us to operate Coindelta exchange for the last 6 months. The curb on the bank accounts by RBI has made us handicapped in order to provide seamless deposit and withdrawal services. There has not been any significant progress in the Supreme Court case which makes it difficult to predict when we will see the regulation.
Yadav further emphasized that there exists a limit until which exchanges can operate under unfavorable circumstances. Throughout the past year, exchanges that have remained open were running with no revenues and high expenses.
“Running the exchange is very expensive in such unfavorable environment. We have been operating at a minimal trade fee, bearing all the costs ourselves ensuring that your trading experience remains unaffected in the current unregulated environment. Economically, it’s no longer viable to continue with the exchange,” he explained.
Don’t Expect Industry to Revive Quickly
Indian government officials may expect its cryptocurrency sector to flourish if and when the government decides to regulate cryptocurrencies.
But, companies that have lost millions of dollars in the past year trying to operate under an inoperable environment is unlikely to come back anytime in the near future.
The best bet, in a highly unlikely event that India legalizes bitcoin exchanges soon, is foreign companies and leading exchanges expanding into the Indian market.
It remains to be seen whether exchanges would be willing to take the risks given the reluctance of the government of India in facilitating the growth of the local cryptocurrency industry and its policies that essentially force cryptocurrency exchanges out of the economy.